Odisha approves new price formula for iron ore supply

Faced with lukewarm response to its bid to pre-empt 50 per cent of iron ore for local end-use industries, the state government has come up with a new pricing formula to ease worries for the steel industries.

Despite the reservation and consequential allotment of iron ore, industries gave a cold shoulder, citing exorbitant prices by lessees.

"Though we had pre-empted ore for the local industries, they did not lift the material, citing prohibitive prices. Taking the average sale price published by IBM as the base rate did not work as it reflected the price of iron ore 5-6 months back. Now, it has been decided that the ore will be made available to industries at a price which the lessee sold a month back. Government order has been obtained for the new pricing mechanism and we will come out with a notification soon," said a senior official at steel & mines department.

Reacting to the government's decision, an official of a state based steel plant said, "Considering lessee rates as benchmark still has some discrepancies as the miners do not always show exact prices sold to outside buyers. However, we welcome the step of the government to de-link ore supply rates from prices published by IBM and rates obtained through OMC's iron ore auction." The state government had come out with a resolution in December 2012, as per which, standalone miners were to offer at least 50 per cent of their iron ore production to state based user industries. Later, the resolution was also made applicable to state run mining company, Odisha Mining Corporation (OMC).

Steel units were allocated 4.2 million tonne of iron ore for the January-March quarter of 2014-15 from standalone miners. OMC had also committed supply of 2.5 million tonne of iron ore to the state based industries for the same period of last fiscal.

But the end user plants did not lift the iron ore, insisting that the lessees need to slash prices. The government received representations from many industries indicating non-acceptability of price.

The government is also working on a price formula for iron ore to be offered on long-term basis via e-auction.

"Since average sale price of iron ore published by IBM was taken as reserve price for OMC's e-auction, it was very steep and did not attract buyers. Henceforth, apart from IBM price, market price of iron ore sold by lessees and also finished steel products will be factored in to fix the reserve price for auctions," said the official.